Page 24 - August-2020-Issue

ARTICLE

further basis for courts to inter-
fere with financial instruments is
a matter that merits consideration
and debate.
That this is a somewhat tricky
question has perhaps been recog-
nised in Singapore. In response
to the COVID-19 pandemic, the
Singapore parliament enacted
certain “temporary measures”
under the COVID-19 (Temporary
Measures) Act 2020. In introduc-
ing the Bill that led to the Act, the
Minister of Law openly admitted
that Parliament was interfering
with the freedom of contract on
of credit issued by a US Bank submission – at least at the ad- an exceptional basis because such
in favour of an Iranian Bank. interim stage. interference was justified by the
Following the Iranian revolution, Secondly, the Court in Hallib- current circumstances. One of the
the US Government had blocked urton v Vedanta accepted that measures is to prevent the ben-
all Iranian assets under the juris- the circumstances in Itek were eficiary of a performance bond
diction of the United States and “exceptional circumstances wh- from making a call on the bond
cancelled export contracts. The ich [made] it impossible for the until at least seven days before
US court took the view that any the performance bond expires if
claim for damages against an guarantor to reimburse himself the default prompting the call is
if he ultimately succeeds” and
Iranian purchaser arising from materially caused by COVID-19
a fraudulent draw-down of the that “a mere apprehension that (section 6 of the Act). A legislative
letters of credit would not be the other party will not be able imprimatur, particularly one that
executable in Iran given these to pay, is not enough”. There is temporary for the duration that
circumstances, and therefore al- does not seem to been a similar the effects of COVID-19 are felt,
lowing encashment of the bank submission by Halliburton as to seems to a convenient route for
guarantee/letters of credit would Vedanta’s ability to repay. Yet, jurisdictions to achieve a balanc-
cause irreparable harm to the the Court took the view that if no ing of interests without having to
plaintiff. The court therefore re- interim protection was granted, shape existing legal principle in
strained the call. and the bank guarantees were order to do justice.
allowed to be encashed while
the lockdown was in place, “the
There seem to be two dif- injury and prejudice that would Expiration of validity of
ferences between Itek and result to the petitioner merits be-
Halliburton v Vedanta ing categorised as irretrievable”. performance bonds
The second interesting issue
First, in Itek, there had been Perhaps, these arguments may be that the Halliburton v Vedanta
a prior finding of fraud in the examined more closely when the decision raises is the question
making of the call, and there- matter returns before the Court of what would happen to an in-
fore the examination of whether for a fuller hearing on whether
there would be irreparable dam- the injunction should be made junction against a bond call that
lasts for the period of a lockdown
age were the injunction not to more permanent pending the
be granted was based on that outcome of the arbitration. if the lockdown is extended be-
prior finding. While there was a yond the period of validity of the
submission by Halliburton that There is no doubt that the current bond.
Vedanta’s call was also fraudu- COVID-19 pandemic is an ex- In Halliburton v Vedanta, the
lent, the Court does not seem ceptional and deeply disruptive Court has currently granted an
to have been persuaded by that event. But whether it provides a injunction for a period that ends

24 KaleidOscope May, 2020